Most of the homeowners you know, including yourself, probably have an HO-3 home insurance policy. That’s because an HO-3 policy is one of the most popular types of homeowners insurance for people who own their single-family home, multi-family home, or townhome. It also gives you more coverage than an HO-1 or HO-2 policy.
If you need the right HO3 policy to protect your home, a local independent insurance agent can help you find it. They'll get you matched to the ideal amount of coverage for your unique property. But first, here's a breakdown of HO3 insurance and why it's necessary.
What Is HO-3 Homeowners Insurance?
So, what is an HO3 policy? HO3 home insurance, or HO-3 insurance, is the most common home insurance coverage, and most private property insurance companies offer it. This coverage protects your home and belongings, and covers liability for bodily injuries and property damage caused by you and the residents in your household, including pets.
Named Peril vs. Open Peril HO3 Coverage
An HO-3 homeowners insurance policy provides different coverage for your home's structure or dwelling than for your belongings. Your home and additional covered structures are covered under "open perils," meaning your policy will protect against any disaster unless it's specifically excluded in your policy.
In contrast, your belongings or contents are covered under "named perils," meaning your policy will only protect them against specifically listed losses, such as fire damage, theft, etc.
What Does HO3 Insurance Cover?
HO3 insurance coverage protects your home's structure, your contents or personal belongings, and your financial responsibility if you or members of your household cause bodily injury or property damage to others. What is covered under an HO3 policy is standard and includes six key components.
Dwelling Coverage
HO3 dwelling coverage covers your home and attached structures, such as a porch or garage, up to the replacement cost of the policy. Note that there is a difference between replacement cost coverage and the market value of your home. Replacement cost coverage is specifically intended to help you rebuild if your home is destroyed, while the market value includes the value of your land and home.
Other Structures Coverage
Anything separate from your home, like detached garages, driveways, pools, sheds, and fences, is usually covered under the "other structures" part of your policy. Coverage is typically capped at 10% of your dwelling limit. So, if your dwelling coverage is $250,000, coverage to replace or repair a separate structure on your property would pay out up to $25,000 after your deductible.
Personal Property Coverage
Your personal property coverage protects your clothing, furniture, television, and other personal belongings up to the coverage limit, typically 50% of your dwelling limit. Coverage for these items is only provided in the event of losses resulting from specifically listed incidents, known as named perils. These perils often include theft, vandalism, fire damage, and more.
Typically, personal property coverage is offered at either actual cash value or replacement cost. In the case of actual cash value, the coverage considers depreciation and wear and tear when calculating the amount to be paid. Replacement value coverage provides the full cost required to replace the lost or damaged items.
Loss of Use
If your home suffers significant damage, your loss of use coverage, also called additional living expenses coverage, can help cover the cost of temporary housing and relocation expenses while it's being fixed up. This coverage can help with expenses like hotel bills, restaurant meals, pet boarding, and more. The coverage limit is usually 30% of your dwelling coverage.
Personal Liability
Personal liability coverage under an HO-3 policy protects your finances if you or members of your household are held liable for third-party property damage or bodily injury. It typically has coverage limits ranging from $100,000 to $500,000 and offers coverage for legal fees, court settlements, and other related costs.
Medical Payments
Medical payments coverage, included in an HO-3 policy's liability coverage, offers financial protection for medical expenses incurred when a visitor is injured at your house or if you or members of your household cause injury to another person. Coverage can pay for hospital fees, ambulance charges, dental and surgical costs, funeral services, and other medical expenses. The coverage limit for medical payments typically ranges from $1,000 to $5,000.
HO3 Homeowners Insurance Explained
What is an HO3 insurance form? An HO-3 insurance policy provides coverage for your home and personal belongings, but in different ways. The physical structure of your home and attached structures, such as fences or detached garages, are protected against a wide range of incidents, known as "open perils," with the exception of those specifically excluded in your policy.
Given the significant investment you have in your home, it is highly recommended to opt for open peril coverage for your dwelling. However, the contents of your home are only covered in the case of specific incidents known as "named perils."
Named Perils
The coverage for your personal belongings is limited to the risks explicitly mentioned in the policy. These named perils are:
- Fire and lightning
- Explosions
- Smoke
- Hail and wind
- Malicious mischief and vandalism
- Theft
- Volcanic eruptions
- Falling objects
- Freezing of household systems
- Weight of sleet, snow, and ice
- Accidental flooding from stream or water
- Sudden and accidental tearing apart, burning, cracking or bulging of household systems
- Sudden and accidental damage from artificially generated electrical current
- Riots and civil commotion
- Aircraft
- Vehicles
Open Perils Exclusions
While HO-3 insurance covers your home on an open-perils basis, it doesn't cover everything. Common exclusions in open peril coverage include:
- Freezing pipes and systems in vacant dwellings
- Damage to foundations or pavements from ice and water weight
- Theft from a dwelling under construction
- Vandalism to vacant dwellings
- Latent defects, corrosion, industrial smoke, and pollution
- Settling and wear and tear
- Pets, other animals, and pests
- Weather conditions that aggravate other excluded causes of loss
- Government and association actions
- Defective construction, design, and maintenance
Your independent insurance agent can review your HO3 policy with you to outline its specific coverage exclusions in every section.
What's Not Covered by HO-3 Home Insurance?
Damage caused by floods and earthquakes is usually not covered by most home insurance policies. To protect your home from damage caused by these natural disasters, you'll likely need to buy a separate flood or earthquake insurance policy.
Additionally, several other perils are typically excluded from home insurance policies, such as:
- Damage from earthquakes, mudflows, and sinkholes (also called “earth movement”)
- Demolition of your residence that's ordered by a court to bring it into code
- Demotion or seizure of property by a public authority or government agency
- Water damage from seepage under the foundation, sewer backups, or natural flooding
- Power failure
- War damage
- Homeowner neglect
- Mold and mildew damage
- Insect infestations
You may be able to add separate coverage endorsements or additional policies to supplement your HO3 coverage to protect against some of these disasters. Your independent insurance agent can help you.
Who Needs HO-3 Insurance Coverage?
HO-3 insurance coverage is ideal for homeowners who want comprehensive protection for their homes and personal property against unexpected events. If you're a homeowner, it's helpful to consider the financial risks associated with these events and ensure that you have the right coverage to protect your investment.
There are several types of home insurance coverage available, and an independent insurance agent can work with you to find the best policy for your needs and budget.
How Much Does HO3 Home Insurance Cost?
The current national average cost of HO-3 homeowners insurance is $2,466 per year for a policy with $300,000 in dwelling coverage. However, many factors can influence the cost of your policy, including:
- Your location
- Your claims history
- The amount of coverage you need
- Your deductible
- The age and value of your home
An independent insurance agent can help you find affordable HO3 homeowners insurance near you.
What Are the Other Types of Home Insurance?
There are numerous types of home insurance policies available, each providing a unique set of coverage options. Some of the most common policy types include:
- HO-1: This is the simplest form of home insurance, covering the home's structure, attached structures, appliances, and permanently installed items like carpeting. Claims are paid on a named-perils basis.
- HO-2: This policy offers all the coverage found in an HO-1 policy, but also includes limited liability protection and coverage for detached structures, personal property, loss of use, and more. Claims are paid on a named-perils basis.
- HO-4: This policy type is designed for renters, offering coverage for contents and liability protection, as well as additional living expenses and medical payments if a guest is injured in your home. Claims are paid on a named-perils basis, and there is no coverage for the home's structure, which is covered by landlord insurance.
- HO-5: This policy is similar to an HO-3 but offers coverage for both the home and personal property on an open-perils basis, and may include extra coverage for items like jewelry. This policy is often offered to those with high-value homes.
- HO-6: This policy is intended for condo unit owners and some townhome owners and covers the interior of the unit. The home's exterior is covered by a separate HOA master policy. Claims are paid on a named-perils basis, much like an HO-3 policy.
- HO-7: Mobile, modular, and manufactured homes are covered by an HO-7 policy, which offers coverage similar to an HO-3 policy, with the structure covered on an open-perils basis and contents insured on a named-perils basis.
- HO-8: This policy type is typically used for historic or architecturally significant homes that are difficult or impossible to replace. Coverage is similar to an HO-3 policy, and claims are paid on a named-perils basis.
Work with an independent insurance agent to get set up with the right type of homeowners insurance for your unique home and personal belongings.
An Independent Insurance Agent Can Help You Find HO-3 Insurance
When you're ready to protect your home with the right HO3 insurance, no one's better equipped to help than a local independent insurance agent. These agents have access to multiple home insurance companies, so they're free to shop and compare HO3 policy quotes and coverage for you.
They'll ultimately find you the best deal without sacrificing quality coverage. And down the road, your agent will be there to help you file claims and update your policy when necessary.
FAQs About HO-3 Insurance
What does special HO-3 Insurance cover?
HO-3 insurance offers comprehensive protection for your home, encompassing all essential coverage types like dwelling, personal property, other structures, liability, medical payments, and coverage for additional living expenses. Your home's physical structure is insured against open peril under an HO-3 policy, while your personal belongings are covered on a named-perils basis.
Where can I get HO-3 Insurance?
Many private insurance companies sell this type of coverage. An independent insurance agent can help you find the right coverage and answer any questions you might have.
How much does HO-3 Insurance cost?
HO-3 insurance costs can vary greatly from person to person. A lot of factors can influence the cost of your policy, such as your location, past claims, the age and size of your home, and more. However, the current national average cost of home insurance is $2,466 per year for a policy with $300,000 in dwelling coverage.
Does an HO-3 policy cover flood damage?
HO-3 insurance does not include protection against flood damage stemming from natural sources such as heavy rainfall, hurricanes, tsunamis, and more. Homeowners who want to be covered against natural flood damage typically need to purchase separate flood insurance.
Does an HO-3 policy cover earthquakes?
HO-3 insurance doesn't provide coverage for earthquakes. If you want to be protected from this type of disaster, you'll likely need to buy separate earthquake insurance.
How is HO-3 insurance different from HO-6?
The main difference between an HO-3 policy for a stand-alone home and an HO-6 policy for a condo is that, while an HO-3 policy provides coverage for the physical structure of your home, an HO-6 policy only offers coverage for the interior of your condo unit. This means that the structure of the building itself is not covered under an HO-6 policy, but the master HOA policy.
Is HO-3 broad or special form insurance?
HO-3 insurance is a type of special form insurance. In contrast, broad form home insurance, known as HO-2 coverage, only covers your home and personal belongings, and typically operates under a named-perils policy. This limited coverage and the absence of liability protection make broad form policies an unpopular choice, often not recommended or accepted by mortgage lenders.
In contrast, HO-3 special form policies offer more comprehensive protection, covering your home, belongings, and liability with a broader range of covered perils than broad form insurance.
Sources
https://www.iii.org/article/are-there-different-types-policies
https://www.iii.org/article/am-i-covered
https://www.thezebra.com/homeowners-insurance/policies/what-is-ho-3-insurance-policy/
https://www.bankrate.com/insurance/homeowners-insurance/homeowners-insurance-cost/
